Russia's central bank raises key interest rates

12 Nov 2008 • by Natalie Aster

Russia's central bank raised several key interest rates by 100 basis points late Tuesday, bringing the key overnight repo rate to 8% and the refinancing rate to 12% in a move aimed at reducing inflation and stemming capital flight. The rate hikes came after the central bank allowed the Russian currency, the ruble, to weaken 1% against its dual currency basket on Tuesday, sparking fears of ruble devaluation. "Higher repo rates will probably not do much to stem capital flight; all eyes will rather be focused on if/when the CBR [central bank of Russia] allows for another widening of the [ruble] trading band," said Lars Rasmussen, an analyst at Danske Bank. More ruble weakness in the short term could be "very toxic" for Russian markets, Rasmussen said.

Source: MarketWatch